Most people plan to retire from work, not life, so having an adequate savings and income to live the life you want to means taking advantage of all the options that are available to you.
An annuity is a contract between you and an insurance company in which you make one or more payments in exchange for a future income stream in retirement. There are many different types of annuities; however, the funds in an annuity accumulate tax deferred regardless of which type you select. This benefit alone has become an attractive way to accumulate money for retirement.
How do annuities work?
At the most basic level, annuities have two stages: the deferral stage and the conversion stage. The deferral stage is when you open an annuity with the insurance company and fund it either by a lump sum or periodic payments called premiums. The money then is left in the annuity to accumulate over time. At the conversion stage, the insurance company begins making payments back to you from the total accumulated value of your annuity. This stage is often sometimes called the annuitization or income stage.
Which annuity is right for you?
When considering which annuity is right for you, it really depends on your unique situation. There are five general categories of features that we will need to sit down and discuss further, but below are the general descriptions of each:
3. Type of Interest
4. Form of Payout
5. Tax Status